Paramount Gold Nevada Corp. — FY2020 Form 10-K
Reporting period: Fiscal year ended June 30, 2020, compared with fiscal 2019. Although the request metadata says “2019 Q4,” this is an annual report, not a quarterly filing. Amounts are in U.S. dollars.
Business context and reporting period
Paramount is an exploration and development company with projects in Nevada and Oregon. Its principal projects are the Sleeper Gold Project in Nevada and the Grassy Mountain Project in Oregon. The company had no producing mines and reported no proven or probable reserves; it has not generated revenue from mining operations.
Financial results and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Mining operating revenue | None | None |
| Other income | $728,910 | $400,388 |
| Total expenses | $6,786,351 | $6,388,132 |
| Net loss | $6,430,141 | $5,970,048 |
| Basic and diluted loss per share | $0.23 | $0.23 |
| Cash and cash equivalents at year-end | $5,434,081 | $463,690 |
| Cash used in operating activities | $5,145,291 | $5,633,515 |
| Cash provided by financing activities | $10,120,401 | $3,872,156 |
| Current assets / current liabilities | $5,876,677 / $1,079,491 | $812,461 / $1,077,597 |
| Total liabilities | $6,832,286 | $1,945,987 |
Margins from mining operations are not applicable because there were no mining sales. Other income was primarily $723,279 of reimbursed Sleeper reclamation costs. The reported net loss increased approximately 8%, with exploration spending up 18% to $4.20 million. Total assets were $53.91 million, including $47.33 million in capitalized mineral-property acquisition costs; stockholders’ equity was $47.08 million.
The company used $5.15 million in operating cash, partly offset by $10.12 million of financing inflows. Fiscal 2019 investing cash flow included $1.93 million of net proceeds from a royalty sale; FY2020 investing cash use was $4,719.
Material changes versus FY2019
- Year-end cash rose by approximately $4.97 million, mainly following equity and debt financing.
- Net loss grew by approximately $460,000. Exploration expense rose by $642,475, while general and administrative and professional-fee expenses declined.
- Total liabilities increased to $6.83 million, largely due to the new secured convertible notes and a small PPP loan.
- Common shares outstanding rose from 26.52 million to 32.96 million. Financing included 4.81 million shares sold for $5.0 million gross and sales under an at-the-market facility.
Outlook, financing, risks and unusual items
- Project plans: Management expected to complete the Grassy Mountain feasibility study in FY2021’s second quarter and continue state and federal permitting. The study was being prepared by Ausenco. The Oregon state application required supplemental information; BLM comments on the revised Plan of Operations also remained to be addressed before the federal environmental review process could begin.
- Planned spending: Management estimated FY2021 spending of $1.8 million on corporate administration, $1.25–$1.50 million on Sleeper, and $2.4 million on Grassy Mountain and Frost combined. This implies approximately $5.45–$5.70 million in the stated categories. Separately, the narrative gives project-level budget estimates; investors should reconcile these amounts.
- Funding and debt: The company said planned spending would be funded from cash on hand and other capital resources, while warning that inability to obtain further capital could materially impair exploration and development. Its 2019 secured convertible notes have $5.478 million principal, a 7.5% coupon, 2023 maturity, and conversion price of $1.00 per share; they are secured by a lien on all company assets. A $35,628 PPP loan bears 0.98% interest and may be eligible for forgiveness subject to program terms. The notes require at least $250,000 of working capital.
- Equity and dilution: A May 2020 at-the-market agreement permits up to $8 million of sales, subject to applicable offering limits; by year-end, reported gross sales were $436,783 and net proceeds $312,518. Ausenco received 1,096,791 shares valued at $976,144 for feasibility-study services, held in escrow pending delivery of the study. Subsequent to year-end, the company reported approximately $0.8 million of share-sale proceeds, issued shares for accrued note interest, and converted $200,000 of notes into 200,000 shares.
- Project economics and contingencies: Grassy Mountain’s 2018 pre-feasibility study estimated $110 million of life-of-mine capital and average annual production of 47,000 ounces of gold and 50,000 ounces of silver over seven years. These are preliminary estimates, not demonstrated project economics; the filing cautions that they may not be realized. Sleeper’s earlier PEA likewise is not a feasibility study. No project has established proven or probable reserves.
- Reclamation: The recorded reclamation and environmental obligation was $615,170; the current undiscounted estimate of Sleeper reclamation costs was $4.01 million. The company reported $695,041 in its commutation account and reclamation bonds, and insurance coverage of up to $25 million for reclamation costs if the bond is insufficient. Actual costs and required bonding could differ from estimates.
- Other risks: Management cited COVID-19-related disruption and uncertainty, permitting delays, need for additional financing, volatile precious-metal prices, title and reserve uncertainty, environmental and reclamation obligations, and exploration and development risks. Cash balances included $5.13 million above federally insured limits. No dividends are anticipated.
Most important facts for investors to verify
- Whether the Grassy Mountain feasibility study is completed on schedule, what its results show, and whether state and federal permits progress.
- Current cash runway against planned spending, and whether additional equity or debt financing will be needed.
- Convertible-note terms, security, interest burden, conversion activity, and the potential dilution from further share issuance and outstanding awards.
- Whether project resource estimates can support proven or probable reserves and economically viable mine plans; preliminary study projections are not guarantees.
- Reclamation estimates, bond adequacy, and the availability and scope of insurance and commutation funds.
- The annual filing’s actual reporting period and the consistency of the FY2021 budget figures across the MD&A and project plans.